Chandigarh

StateCommission

CC/49/2020

Ravinder Singh - Complainant(s)

Versus

India Infoline Finance Ltd. - Opp.Party(s)

Balbir Singh Jaspal Adv.

27 Sep 2021

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION, U.T. CHANDIGARH

============

Consumer Complaint No.	:	CC/49/2020
Date  of  Institution	:	17/02/2020
Date   of   Decision	:	27/09/2021

 

 

 

 

 

1.     Ravinder Singh Barara, Proprietor Modern Arcade, R/o H.No.838, Urban Estate, Sector 7, Ambala City.

 

2.     Baljit Kaur wife of Sh. Ravinder Singh Barara, R/o H.No.838, Urban Estate, Sector 7, Ambala City.

 

….Complainants

 

Vs.

 

 

1.     India Infoline Finance Limited, 12-A, 13^th Floor, Parinee Crescenzo, C-38 and C-39, G-Block, Behind MCA, Bandra Kurla Complex, Bandra East, Mumbai-400051.

 

2.     India Infoline Finance Limited, SCO 2907-2908, Sector 22-C, 2^nd Floor, Chandigarh.

…… Respondents

 

 

BEFORE: JUSTICE RAJ SHEKHAR ATTRI    PRESIDENT

                MRS. PADMA PANDEY                   MEMBER

                MR. RAJESH K. ARYA                    MEMBER

 

PRESENT	:	Ms. Pearl Jaspal, Counsel for Complainants.
	:	Sh. Vineet Sehgal, Counsel for Opposite Parties.

 

PER PADMA PANDEY, MEMBER

 

 

 

                In brief, the facts necessary for the disposal of the instant Consumer Complaint are, the Complainant had taken a loan of Rs.24,14,478/- from the Opposite Parties vide Loan A/c No. 758364. The rate of interest was 10% with monthly installment was Rs.25,946/-. The period of loan was from 05.08.2016 to on 05.07.2031. On 02.07.2019, the Complainants showed their willingness to clear all the outstanding dues, against which vide letter dated 04.06.2019, Opposite Parties directed the Complainants to deposit Rs.65,796.41/- as foreclosure charges, which according to the Complainants they were not entitled as per law. The Complainants requested the Opposite Parties not to charge foreclosure charges, but to no avail. Eventually, the Complainants had to deposit the entire amount demanded by the Opposite Parties under compelling circumstances.  Alleging that the aforesaid acts amount to deficiency in service and unfair trade practice on the part of the Opposite Parties, the Complainants have filed the instant Consumer Complaint.

 

2.         Notice of the complaint was sent to Opposite Parties seeking their version of the case. 

 

3.         Opposite Parties contested the Consumer Complaint and filed their joint written statement, inter alia, admitting the basic facts of the case. It has been pleaded that loan agreement was executed between the Complainant, co-borrowers and the Opposite Parties. The loan agreement contained clause with regard to pre- payment charges in case of foreclosure of the loan by borrower. The calculations were made as per the terms & conditions of the loan agreement as mutually agreed and executed between the parties and as per the applicable guidelines as issued by the RBI from time to time. It has been asserted that as there was a default on the part of the Complainant and his co-borrowers, broken period interest was charged from them by the answering Opposite Parties. The foreclosure charges/pre-payment penalty on the untimely closure of loan was correctly charged from the Complainant and his co-borrowers.  Pleading that there was no deficiency in service on their part, a prayer has been made for dismissal of the complaint.

 

4.         Parties led evidence by way of affidavits and documents.

 

5.         We have heard the learned counsel for the Parties and gone through the record of the case. After scanning of record, including written arguments, our findings are as under:-

 

6.         In the present Consumer Complaint, the Opposite Parties have taken objections that the Complainant is not covered under the definition of ‘Consumer’ as defined in the Consumer Protection Act; the Complainants have not impleaded the other co-borrowers of loan as party in the present Complaint and the Complainants have concealed vital facts while filing the present Complaint.  However, per material on record, this Commission is of the concerted opinion that the aforesaid objections raised by the Opposite Parties are flimsy in nature and in fact, have no legs to stand, in as much as, the Complainants have not concealed any material facts rather, it was fairly conceded by them in the Complaint that earlier they had filed a Complaint before the Ld. District Consumer Disputes Redressal Forum-II, U.T. Chandigarh (now, District Commission-II, U.T. Chandigarh) which was dismissed on 01.11.2019 on the ground of pecuniary jurisdiction since the amount exceeded by Rs.20,00,000/-.  Further, the record of the Opposite Parties themselves shows the name of the customer as ‘Modern Arcade’, along with co-borrowers Ravinder Singh Barara and Baljeet Kaur. Now, coming to the objection taken by the Opposite Parties that the Complainants are not ‘Consumers’. This objection, to our mind, needs to be rejected being not tenable because the loan/service availed by the Complainants was in the nature of ‘Home Loan’ which very much falls under the purview of ‘Consumer’ under the Consumer Protection Act. Moreover, it has been admitted by the Opposite Parties that a loan agreement has been executed between the parties to the lis, hence the Complainants are consumer of Opposite Parties.     

 

7.         The main crux of the matter in this case is the Opposite Parties i.e. ‘India Infoline Finance Limited’ had charged foreclosure charges when the Complainants offered to foreclose the loan to the extent of Rs.65,796.41P. There is no dispute about the fact that the Complainants had taken a loan of Rs.24,14,478/- from the Opposite Parties vide Loan A/c No. 758364, the initial rate of interest was 10% p.a. and the installment started from 05.08.2016. However, we find from the various amortization schedules annexed with the Consumer Complaint that the rate of interest was changing from 10% to 11%, which means that the loan was sanctioned on Floating Rate of Interest (FRR). Exhibit R-2, which is the Final Sanction Letter dated 15.09.2016 issued by the Opposite Parties also corroborates this fact that the said Home Loan was against Adjustable Interest Rate (AIR).

 

8.         In view of foregoing, now the sole question which survives for determination is whether the Opposite Parties were right in charging the foreclosure amount from the Complainants. The answer to this question is in negative.

 

9.         The Reserve Bank of India issued notification/circular dated 02.08.2019 addressed to all the NBFCs regarding levy of foreclosure charges/pre-payment penalty on Floating Rate Loans by NBFCs. Para 2 of the said notification is very material to the present Consumer Complaint and the same reads as thus: -

 

“2.     It is clarified that NBFCs shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned for purposes other than business to individual borrowers with or without co-obligant(s).” 

 

                Perusal of above makes it emphatically clear that banks shall not charge foreclosure charges/ pre-payment penalties on any floating rate term loan sanctioned, for purposes other than business, to individual borrowers with or without co-obligant(s) as the case may be.

 

10.         In Civil Writ Petition No. 17501 of 2012 titled as “Seema Tulisan Versus India Housing Finance Ltd. and Another”,  decided on 09.04.2013, the Hon’ble Punjab and Haryana High Court has held that the Petitioner was paying floating rate of interest on the date of pre-deposit of the loan amount and thus, the Petitioner could not be charged foreclosure charges. The Hon’ble High Court directed the Respondents to refund the foreclosure charges of the loan account, as per guidelines issued by National Housing Bank.
11.         Now, analyzing the present case in the light of the aforesaid notification/Circular issued by the Reserve Bank of India and the judicial pronouncement of the Hon’ble Punjab & Haryana High Court, this Commission noticed that (i) the Complainants had availed Home Loan from the Opposite Parties (ii) the said loan is not for any commercial activity (iii) the loan was on Floating Rate of Interest as is evident from the Sanction Letter issued by the Opposite Parties themselves  (iv) in the Loan Agreement nothing has been concealed, the Complainant No.1 Ravinder Singh Barara signed on behalf of his proprietorship firm i.e. Modern Arcade, along with his co-borrower i.e. himself and his wife. It is apt to note that Ravinder Singh Barara is the Proprietor of the proprietorship firm namely – Modern Arcade.

 

12.         In W.P. No. 5521 (W) of 2017 – “Devendra Surana Versus Bank of Baroda”, decided on 12.12.2018, the Hon’ble High Court of Calcutta held that no prepayment/ foreclosure charges can be levied on a proprietary concern on floating rate of interest on loans and the nature of a sole proprietorship firm is equivalent to that of a natural person and the natural person owning the firm do not enjoy the benefit of being treated as separate legal entity.   Applying the principles of law laid down in “Seema Tulisan Versus India Housing Finance Ltd. and Another” (supra) and “Devendra Surana Versus Bank of Baroda” (supra), we are of the considered opinion that the action of the Opposite Parties in charging foreclosure charges/pre-payment amount from the Complainants is contrary to RBI circular of foreclosure charges and being NBFC they are liable to reimburse/pay back the foreclosure charges illegally collected from the Complainants.

 

13.         For the reasons recorded above, we partly allow the complaint with cost and the Opposite Parties are held liable and directed as under:-

 

1. 10.07.2019, within a period of 30 days from the date of receipt of a certified copy of the order, failing which, thereafter, the said amount of Rs.65,796.41P shall carry 3% penal interest i.e. 12% p.a. (9% p.a. plus (+) 3% p.a.), from the date of passing of this order, till realization.

 

2.  

 

14.         Certified copies of this order be sent to the parties, free of charge.

 

15.         The file be consigned to Record Room, after completion.

 

Pronounced

27^th September, 2021                                                         

Sd/-

(RAJ SHEKHAR ATTRI)

PRESIDENT

 

 

Sd/-

                                                        (PADMA PANDEY)

MEMBER

 

 

Sd/-

                                                        (RAJESH K. ARYA)

MEMBER

“Dutt”